In May 2024, Sam Ash, a renowned music retailer with a legacy spanning over 100 years, filed for Chapter 11 bankruptcy. The company announced the closure of all its stores across the US, marking a significant transition in its operations. This ultimately led to the acquisition of its assets by Gonher, a Mexican-based retailer. Originating from a single storefront in Brooklyn in 1924, the family-run business experienced dwindling sales exacerbated by the COVID-19 pandemic.
Jordan Meyers, Sam Ash’s chief restructuring officer, explained in judicial filings that this public health crisis hastened a broader trend toward online musical instrument purchases. In this blog, we will briefly discuss the reasons that led to Sam Ash’s closure.
Key Takeaways
- Significant Asset Liquidation: Sam Ash Music, a century-old music retailer, filed for Chapter 11 bankruptcy and announced the closure of all its stores, ultimately liquidating its assets for $15.2 million to Gonher, a Mexican retailer. This marks a significant transition for the company from physical retail to potentially focusing on online sales.
- Strategic Acquisition by Gonher Music Center: Gonher Music Center’s acquisition includes key assets from Sam Ash, such as Samson Technologies, and parts of the e-commerce operations. This strategic move could position Gonher to enhance its presence in the US music retail market, especially against competitors like Sweetwater and Guitar Center.
- Focus on Intellectual Property and Employee Retention: The deal highlights the importance of Sam Ash’s intellectual property and brand reputation, which were considered valuable assets during the acquisition. Additionally, the agreement includes provisions for the retention of some Sam Ash employees, showcasing a commitment to workforce stability amidst corporate restructuring.
- Impact of the Pandemic and Shift to E-commerce: The COVID-19 pandemic accelerated a broader shift towards online musical instrument sales, contributing to financial strains for Sam Ash, which heavily relied on in-store traffic. This situation underscores the challenges faced by traditional retailers in adapting to the digital marketplace.
Gonher Music Center Acquires Key Assets of Sam Ash Amid Store Closures and Bankruptcy
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Industry experts are keenly watching the developments at Sam Ash Music following its acquisition by Gonher Music Center, a Mexican retailer. Gonher has purchased Samson Technologies and selected e-commerce assets from the iconic 100-year-old musical instrument retailer.
Reports from March indicated that Sam Ash was planning to shut down 18 of its stores across the US, including the iconic flagship store in New York, as it struggled to compete with the surge in online musical instrument sales.
By May, Sam Ash Music had declared that it would be closing all of its stores permanently by the end of July due to filing for Chapter 11 bankruptcy protection, marking the closure of its operations that spanned over a century. During this period, it was reported that the company was considering selling its e-commerce operations and intellectual property.
Recently, Gonher Music Center was confirmed as the new owner of select assets from Sam Ash following an asset auction, with a winning bid of $15.2 million. This acquisition includes parts of Sam Ash’s wholesale and online business components.
Although the closure of all physical Sam Ash stores is proceeding, resulting in job losses for many retail employees, the acquisition terms do offer some employees the opportunity to transition to Gonher, likely to support the ongoing online business activities of Sam Ash.
As outlined in an updated bankruptcy filing, Gonher placed a bid for Sam Ash’s assets on June 14. The auction, held on June 20, saw Gonher as the lead bidder for the Samson Technologies and Sam Ash e-commerce assets. Initially valued at $10.3 million, the bids went through several rounds, with Gonher ultimately winning the auction with a final bid of $15.2 million. When filing, the retailer operated 42 stores across 16 states, but its website later listed only 36 stores in 14 states.
Derek Ash, a descendant of founders Sam and Rose Ash who opened the original store in Brooklyn’s Brownsville area in 1924, mentioned that the company’s numerous locations struggled to remain viable in a market increasingly dominated by online sales. In March, the company had already closed 18 stores as a strategic move to extend its operational longevity, according to Mr. Ash. However, he acknowledged at the time that completely closing down was ultimately “a necessity.”
Clayton Durant, the founder of CAD Management and an adjunct professor at the Roc Nation School of Long Island University, recently offered his perspective on Gonher Music Center’s acquisition of Sam Ash Music. He underscored the importance of Sam Ash’s intellectual property, particularly its established brand reputation, as a valuable asset that would be attractive to buyers like Gonher. Durant also commended the deal for its focus on employee retention, noting the transfer of some Sam Ash workers to Gonher as a positive step, particularly in a corporate climate often dominated by shareholder interests.
Further, Durant discussed the potential impact on the competitive landscape of the US music retail industry if Gonher integrates Sam Ash’s e-commerce capabilities. He suggested that this move could position Sam Ash as a formidable competitor against primarily online retailers like Sweetwater, and even against larger entities like Guitar Center, which operates 300 stores. By enhancing its digital offerings, Sam Ash could effectively strengthen its market presence under Gonher’s leadership.
Financial Challenges and Bankruptcy Filing Highlight Sam Ash’s Decline Amid Pandemic and E-Commerce Shift
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Court filings revealed that Sam Ash’s financial troubles were due to heavy dependence on physical store traffic, excessive store locations, a halt in customer visits during the pandemic’s peak, and falling revenues. In May, the company reported that its assets and liabilities were each estimated to be between $100 million and $500 million.
Compounding these challenges, Sam Ash faced severe liquidity issues, leading to unpaid rent for most of its properties in April and May, along with delays in payments to vendors. Consequently, vendors stopped deliveries or tightened their terms, significantly disrupting the supply of products to both physical stores and online consumers, further aggravating the financial and operational struggles of Sam Ash, as previously reported by the company.
Sam Ash Music entered Chapter 11 bankruptcy with approximately $20 million in debts owed to its main financier, Tiger Finance, and an additional $20 million to landlords and suppliers, including notable names like Yamaha Corp, Gibson, and Fender.
To salvage its assets, Tiger Finance had proposed acquiring Sam Ash’s remaining inventory, intellectual property, and other assets while providing financial support up to $20 million to assist with the bankruptcy proceedings at the time, as per court records–which was refused for a potential “better deal.”
In the fiscal year 2023, Sam Ash’s physical stores generated $145 million in revenue, whereas online sales accounted for $42 million. Despite these figures, the company’s total revenue still feels well below its pre-pandemic performance. The shift towards online shopping, a trend that gained significant momentum during the COVID-19 pandemic, posed substantial challenges to the retailer. Based in Hicksville, New York, Sam Ash employed 830 staff across all of its stores in different states, including Florida, New York, and California.
About Sam Ash
Established in 1924, Sam Ash Music Corporation is a leading family-owned music retailer in the United States, boasting over 40 locations nationwide. The retailer is renowned for a broad spectrum of musical and audio products, ranging from guitars, basses, and drums to keyboards and orchestral instruments. Sam Ash also offers a comprehensive line of professional audio, recording, and DJ equipment.
The company serves musicians at all skill levels and features prominent brands such as Fender, Gibson, and Yamaha. It provides a host of specialized services, including instrument rentals and repairs, and offers discounts for students participating in school music programs. Additionally, Sam Ash stocks an extensive array of live sound and recording gear, as well as lighting equipment, catering to the needs of bands, DJs, and recording artists.
While Sam Ash maintains a significant presence with its physical stores, it also operates an online platform for e-commerce. Despite some critiques regarding its user interface, which some shoppers find less intuitive than that of rivals like Guitar Center, Sam Ash is celebrated for its expert staff, comprised largely of experienced musicians, who elevate the customer service experience with their deep knowledge and expertise.
Conclusion
Sam Ash Music’s liquidation and subsequent acquisition by Gonher Music Center mark the end of a significant chapter in US music retail history. Overextended by its reliance on physical stores and disrupted by the pandemic, Sam Ash faced severe financial challenges that ultimately led to its bankruptcy filing.
Despite these setbacks, Gonher’s acquisition of key assets, including the e-commerce platform and intellectual property, may allow Sam Ash to continue in a digital format. As industry experts like Clayton Durant suggest, with the right strategy, Sam Ash could reemerge as a competitive force in the online music retail space, potentially rivaling established players like Sweetwater and Guitar Center. However, the closure of all physical stores signals a great shift in the company’s business model and the broader retail industry.
